Wednesday, August 21, 2013

Snowball fight, part X

This case seems like a good poster child for those arguing
in favor of a “threats” action for US law, since current law doesn’t provide
much protection against trademark overclaiming.It’s another litigation deathmatch between producers of snowballs, shaved
ice confections flavored and colored with “flavoring syrups” made from “flavor
concentrate” mixed with simple syrup.

In the mid-2000s, SnoWizard began asserting various state
and federal trademark rights in flavor concentrates it manufactured,
registering 22 trademarks between 2003 and 2008 and sending numerous C&Ds
to other industry participants.In 2006,
Southern Snow sued, claiming that SnoWizard fraudulently procured a
registration for ORCHID CREAM VANILLA, made false assertions of trademark
infringement of ORCHID CREAM VANILLA and WHITE CHOCOLATE & CHIPS, made
false assertions of trademark rights in SNOBALL, and violated the Louisiana
Unfair Trade Practices and Consumer Production Act (LUTPA).SnoWizard counterclaimed for infringement and
dilution; the case was stayed until the TTAB cancelled the ORCHID CREAM VANILLA
registration on descriptiveness grounds.

In 2009, Southern Snow and a new plaintiff, Parasol, filed a
new case challenging SnoWizard’s assertion of trademark rights in 10 other
terms, and SnoWizard counterclaimed for infringement and dilution of eight of
those terms.In 2010, the court
dismissed plaintiffs’ claims for damages for procuring a false trademark
registration under state and federal law, because they didn’t show cognizable
injury or ascertainable loss.The court
also dismissed infringement claims for PRALINE, KING CAKE, BUTTERED POPCORN,
GEORGIA PEACH, DILL PICKLE and BUTTERCREAM, because they are generic terms.

Southern Snow, Parasol, and a new plaintiff, Simeon, then
filed a new suit against SnoWizard, asserting various claims against SnoWizard
for infringement of SOUTHERN SNOW and FLAVOR SNOW and challenged the validity
of more SnoWizard trademarks, including CAJUN RED HOT, MOUTAIN MAPLE, TIRAMASU
[sic], and ZEPHYR. SnoWizard
counterclaimed for trademark infringement and dilution and for cancellation of
SOUTHERN SNOW and FLAVOR SNOW.

In the consolidated case, the judge dismissed all of
plaintiffs’ unfair competition claims based on alleged false advertising,
concluding that using a trademark symbol with a generic term wasn’t literally
false, and that there was no evidence of materiality to consumers or actual or
likely deception.SnoWizard also won
partial summary judgment on MOUNTAIN MAPLE and SNOSWEET, because the plaintiffs
“offered no evidence to rebut the presumption of validity” attached to
registered trademarks.

One month before trial was scheduled to begin, plaintiffs
filed a new suit, naming SnoWizard’s owner and principal officer, and six new
plaintiffs with varying ties to the existing plaintiffs.Thereafter, one of the cases went to a new
judge, who ruled that many of the claims had to be dismissed as duplicative of
substantially identical claims previously alleged by the same plaintiffs or
their privies, violating the rule against claim-splitting.SnoWizard argued that three plaintiffs were
in privity because they were related through common ownership by one person,
and that another was in privity because of an asset sale; the others were
allegedly in privity because they distributed the products of
manufacturer-plaintiffs.The plaintiffs
conceded that three of them were closely related through common ownership, but
argued that a fourth was a competing manufacturer with no relationship to
them.Two distributors, they argued,
weren’t in privity with each other; they were in different states and the
owners had never met, and two plaintiffs operated snowball stands on opposite
sides of the Mississippi River.Also,
plaintiffs argued that claims based on more recent conduct, such as SnoWizard’s
applications for new federal trademark registrations, weren’t encompassed in
the earlier suits.But SnoWizard didn’t
seek dismissal of all the claims as duplicative, only the ones that were
essentially the same as those in the earlier suits—the vast majority.

The court accepted that most of the new plaintiffs were
closely enough related to the old ones to justify applying the rule against
claim-splitting: the distributors were in privity with the manufacturers by
virtue of their express legal relationship, and the one that bought the assets
from another was also in privity.As for
the retailers who sold directly to the public, they did buy from the original
plaintiffs, which might be enough for privity.But in the absence of clear authority on this, the court declined to
find that their interests were adequately represented by the plaintiffs in the
original cases.But mostly, the rule
against claim-splitting applied; the only explanation the court found credible
here was an attempt to “expand Plaintiffs’ procedural rights, upset the trial
schedule, harass Defendants, and avoid the requirements of amendment of
Plaintiffs’ claims.”The court noted
that one plaintiff filed additional lawsuits alleging similar claims in
2012.Plus, though the cases had already
been consolidated for trial, the parties “failed to come forward with any
manageable way to present the issues articulated in the four consolidated cases
to a jury.” Thus, the court dismissed the duplicative claims except as to the
two retailer plaintiffs.

However, there wasn’t evidence establishing a material issue
of fact on the claims for fraudulent procurement of trademarks and unfair
competition.The Lanham Act, §38,
provides for liability to any person injured by a fraudulently procured
registration, but only “for any damages sustained in consequence thereof.”Louisiana’s trademark law has a similar
provision.LUTPA likewise requires an “ascertainable
loss” of money or property due to an unfair or deceptive practice.Plaintiffs didn’t show such injury, since
apparently dealing with C&Ds and claims to own generic terms didn’t count.

The unfair competition/false advertising claim was doomed
for the same reasons.The use of a trademark
symbol for a generic term wasn’t literally false, and plaintiffs didn’t show evidence
of actual consumer confusion and materiality.Circuit law clearly required such evidence in the absence of literal
falsity; even expert evidence of materiality and deception is insufficient when
it’s not based on reliable market survey analysis and instead relies on common
sense.

Nor did plaintiffs rebut the presumption of validity established
by the federal registrations of MOUNTAIN MAPLE and SNOWSWEET.

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